Interview with Dr. Felix W. Egli and Ms. Yue (Fiona) Gao from VISCHER

What are the key features of Switzerland’s recently signed FTA with China?

Yue (Fiona) Gao:

The FTA dismantles tariffs fully or partially for the vast majority of bilateral trade, whereby in some specific cases the tariff cuts would be subject to certain transition periods. Non-tariff barriers are tackled by sector-specific cooperation agreements. As to trade in services, market access commitments are made mutually for various services; the movement of persons providing cross-border services are somewhat eased. Of special interest to the Swiss side is the improved level of intellectual property protection.

How will these features – and any additional features or regulations – appeal specifically to Chinese investors?

Yue (Fiona) Gao:

The tariff cuts on Swiss goods offer huge potential to Chinese importers and investors, especially in light of the enormous goodwill related to the Swiss Made brand (Swissness) worldwide.

As to Chinese goods, only exporters or investors of textiles and shoes or agricultural products will benefit, since all other products already enjoy preferential treatment (zero tariff) granted by Switzerland unilaterally prior to the signing of the FTA.

Many other developed nations have also unilaterally granted zero tariffs on most Chinese products within the framework of GATS/WTO, so where lies the advantage of the FTA for Chinese exporters?

Felix W. Egli:

These unilateral preferential treatments rely on the status of China as a developing country. However, as the second biggest world economy, China may lose this status in the near future. As soon as it is the case, the unilateral grants by the other developed countries will be revoked, whereas thanks to the FTA, Switzerland will not be able to revoke the zero-tariffs anymore.

The Greater Zurich Area has become a focal point for investment. What are the advantages of this particular area?

Felix W. Egli:

The Greater Zurich Area is one of the most vibrant economic centers in Europe not least due to its strong innovation, unique culture of precision and high quality of living. Many renowned companies from China and other global key markets such as Yingli Solar, Trina Solar, Google, IBM or Disney Research Zurich use the Greater Zurich Area as location for the European-wide bundling of key corporate operations, e.g. holding companies, intellectual property management, R&D, supply chain management and finance. Companies find top-qualified, highly productive and motivated employees for all their corporate operations as well as a flexible job market with minimum regulations.

The Greater Zurich Area also offers a wealth of cutting-edge research institutions, a highly reliable infrastructure and an extremely attractive tax system. Last but not least, with its central location in the heart of Europe, the Greater Zurich Area boasts fantastic transportation connections. Its dense network of roads and railways and proximity to Switzerland’s international airports guarantee optimum mobility.

To what extent will investment in Switzerland give non-European investors’ access to the European Union or Europe as a whole?

Felix W. Egli:

By virtue of a whole network of bilateral treaties with the European Union (EU) and the European Free Trade Association (EFTA) Switzerland is economically fully integrated in Europe and yet it could avoid all the disadvantages of political heteronomy from which a small country would inevitably suffer in a political union of much bigger countries.

Isn't the popular vote of February 9, 2014 by which Switzerland adopted a need to introduce quotas for EU workers which would breach the Swiss/EU treaty on the free movement of persons a threat to Switzerland's integration in the EU market?

Felix W. Egli:

No. This law does not apply yet as it is constitutional law only that needs to be implemented by statutory law not before 2017. The EU/Swiss economic interdependence is important for both parties and it is safe to assume that an implementation compliant with the Swiss/EU bilateral treaties will be found.

What is the first step that Chinese companies need to take if they’re looking to take advantage of the FTA?

Yue (Fiona) Gao:

For Chinese companies already doing business in Switzerland or with Swiss counterparts, the first step will be to learn about the impact the FTA has on his business; it may be lowered tariffs, eased visa or establishment restrictions for expats or others. Since the FTA is a bulky document, comprising of numerous rules, the Chinese company would be well advised to present its case to our law firm, so that we can provide a thorough analysis about its potential benefits under the FTA.

For Chinese companies that have not done business in Switzerland yet, their interest will lie in learning, exactly how the FTA sets Switzerland apart from other investment destinations. However, this will still depend on the company’s specific business model and business intentions. We would invite such companies to present their case to us and we would be happy to conduct an analysis and showcase a few possible business opportunities and strategies from a legal standpoint.

Is Switzerland (or the Greater Zurich Area) aiming to attract investment from any sectors in particular?

Yue (Fiona) Gao:

As a liberal and free market economy, Switzerland is open to foreign investment of all kinds. The Swiss government is very cautious about promoting or subsidizing certain specific industries, in order not to distort the market and interfere with the fair competition among market players.

However, the Swiss government strives to create an excellent overall business environment for foreign investors; the omnipresence of multinational companies in Switzerland is the best evidence of its efforts and success.

Therefore, when deciding whether to come to Switzerland, a Chinese investor should first set a clear international strategy of his own. He should then analyze the advantages of the Swiss business environment carefully and see whether these advantages can be translated into competitive edges of his own. A mature investor would never follow some short-term external incentives and forget about his true mission.

Which investment sectors do you envisage having the greatest potential for Chinese investors?

Felix W. Egli: Technology, manufacturing, and trade services.

Yue (Fiona) Gao:

Any level of technological cooperation with Swiss companies or research institutes will bring a competitive edge to Chinese investors in both domestic and global markets. The mode of cooperation may vary from research assignment, R&D agreement, patent licensing, buying up technology and knowhow, or technology motivated M&A. Switzerland can also be a very attractive location for high-tech manufacturing, combining good-value parts from China and the Swiss-made image for the end product. Furthermore, Switzerland is an excellent and well-known location to coordinate international distribution of Chinese export goods and provide related trade services – thanks to its multilingual workforce with high work ethics and international experience.

Felix W. Egli

Attorney at Law

Partner

Felix W. Egli mainly practices in the areas of mergers & acquisitions and corporate finance and advises on all aspects of corporate and commercial law. As Swiss counsel to large industrial groups he has extensive experience in cross-border M&A transactions, equity related capital market transactions (recognized by the SIX Swiss Exchange as representative of issuers), international commercial contracts, corporate governance and related issues. He is the head of the VISCHER China desk.